The European Bank for Reconstruction and Development (EBRD) said it has increased its forecast for Albania's economic growth in 2018 to 3.8% from 3.7% predicted in November.
Growth is being driven by private consumption and investment, EBRD said in its new Regional Economic Prospects report.
"The construction of two major energy sector projects is driving investment, although the direct economic impact on GDP is expected to decelerate in the short term before the economy starts enjoying the operational benefits of the two projects from 2020 onwards," the report reads.
The Trans Adriatic Pipeline (TAP) and the Moglice hydro power plant, the second of three plants of Devoll hydro power project, are some of the major infrastructure projects under construction in Albania.
The total investment of the TAP consortium in Albania will amount to 400 million in each of 2017 and 2018. The consortium plans to start full-scale operation of the pipeline in 2020.
Moreover in 2019, the EBRD expects Albania's economic growth to pick up to 3.9%.
Average inflation in 2017 was just 2%, still below the central bank's target of 3% and despite the continuation of the historically low policy rate of the Bank of Albania, at 1.25%, EBRD added.
"The high level of public debt remains a significant constraint on any fiscal stimulus but credit growth is expected to continue as the health of the banking sector improves and as the level of non-performing loans declines further."
In 2017, Albania's economy expanded by 3.8%, compared with growth of 3.4% in 2016, according to EBRD estimates.
The EBRD expects economic growth in Southeast Europe (SEE) to stand at 3.6% in 2018 and at 3.5% next year.
EBRD has revised up economic forecasts for 2018 as a broad-based recovery continues across its regions, bolstered by stronger investment activity and higher exports.
After suffering acutely during the global financial crisis, countries where the EBRD invests initially struggled to get back on a path to growth. But recovery took hold in earnest during 2017.